How MYR POS Reached 400 Restaurant Brands Across 1,200 Locations on $1.25M Raised (Interview with Founder David Nadezhdin)

Introduction and What Is a Limited-Service Restaurant

Nathan Latka

00:00Hey, folks. My guest today is David Nadezhdin. He's a tech monkey with over fifteen years of experience. He's intimately familiar with all aspects of project from concept to execution, now building myr.io, a POS for limited service restaurants. David, you ready to take us to the top?

David Nadezhdin

00:15>> Yeah, why not? Thank you,

Nathan Latka

00:16All what is a limited service restaurant?

David Nadezhdin

00:20>> Okay, well, the number one point of a limited service restaurant is always think about the one fundamental thing, you pay before you eat. A full service restaurant, you're sitting down, a waiter's coming, you're there to have a good time, and it's all about upselling. If you're looking at a limited service restaurant, the goal is how do I ensure to take as many orders as possible during either a morning rush, a lunch rush, a dinner rush, whatever

00:42>> rush it may be, but that's usually what happens. Anything that's limited service, you're going to be looking at how do I maximize the amount of orders I can input into a certain amount of window of time? How could I minimize that? And then how do I output the results

Nathan Latka

00:57as fast as possible? I am in airports all the time, and I'm the I'm the one that shows up twenty minutes before takeoff and just challenges, just dares them to take off without me. And my favorite restaurants in the airports are the ones where you sit down. I don't have to talk to any humans. I push some buttons on an iPad. I pay and my food comes out. Is that you're powering?

David Nadezhdin

01:14>> We're power we're powering that. We're we're powering that, and that's where it's going towards, but we're what we're starting to see is that there's a huge niche in a huge segment in a limited service restaurant that are simply not being catered to. They're still being catered to with old, they're not antiquated, but enterprise based solutions, much like NCR and micros. They're not being catered to really fundamentally with cloud based systems. What it is, is take for

01:39>> example, any mom and pop type of pizza chain, right? Anybody who's still using a Casio cash register, they have a franchise across The United States or Canada, 400 locations, and now they need to go into this digital world, which is today's reality, right? Everything has now changed, especially with the pandemics, that's accelerated everything, but how do you now deal with this plethora of not just lineups out the door, but now you have orders coming in digitally.

02:06>> You have orders coming from third party integrations, direct integrations, Uber Eats, and Grubhub, and Postmates.

Why Square, Toast, and Others Don't Serve This Market

Nathan Latka

02:12And how do Who who are you replacing? Like, what I mean, why doesn't Toast? Why isn't Square? Why isn't Par? What you know, why does why doesn't OrderMark? Why don't they handle this kind of stuff?

David Nadezhdin

02:22>> Well, because they've originally all started with well, okay. So let's let's go back a second. Square has started with fundamentally a general point of sale for anybody and anything. Right? So they're a point of sale that is all about a payments company. If you're looking at actual POS like Toast, like Lightspeed, like TouchBistro, for example, they were built and inherently servicing a full service market industry. So naturally, their technology stack didn't grow and evolve for what

02:50>> the actual limited service needs are. When we originally started about twelve years ago with the tech stack and the company's only been founded five years ago, we were approached

Nathan Latka

03:00by- Wait, wait, how's that work? How did you start twelve years ago, but you were

David Nadezhdin

03:03>> founded Well, because I used to have my own digital studio and I used to develop a lot of applications and custom applications for different customers and a third party, a third wave coffee shop approached me and said, we want to build a POS. And that was the time when I said, why do you want to build a POS? I said, go get one. And they said, none of them are doing what we need to be doing,

03:21>> and this specific point of sale that they wanted was to say, we want to mimic what Starbucks has done. We want to mimic what McDonald's has done. Right? McDonald's and Starbucks, back then, were full service restaurants and chains, and when these, I mean, I don't know if you remember still, when you walk into a McDonald's, you would have a cash register system. All of a sudden they switched over into their own Bestop POS. They didn't look

03:43>> at full service restaurant technologies because those full service restaurant technologies were not answering to their pain points.

Nathan Latka

03:49Got it.

David Nadezhdin

03:50>> And they built their own system. So basically, we ended up doing this building twelve years ago, a cloud based POS that was solely focused on what McDonald's was trying to deal with, which is maximizing top line revenue, not dealing with a single location at a full service restaurant, which is a

Pricing and Revenue Model

Nathan Latka

04:08lot What's a pizza shop paying you all in today monthly to use the technology on average?

David Nadezhdin

04:14>> Base price will go from $79 and we can go all the way to $299 I mean, it really depends. Everything's a la carte. Everything is, you know, you pay for what you need. And this is something that's very unique in our system because if you're

Nathan Latka

04:26Well, David, on real quick. So So what would you say the average? I mean, was the average, like, would the average be like $150 a month, something like that?

David Nadezhdin

04:31>> 129.

04:32>> 129. Okay.

Nathan Latka

04:33And is just the flat SaaS here or do you take a percent of GMV as well?

David Nadezhdin

04:37>> We take on the transactions as well if they're going to take payment services via our system. So we've gone agnostic, much like Vend has. So as a POS provider, we actually connect to as many different payment terminals as possible because we can obviously get access into their lead generation, into their ISOs, into their agents that actually have feet on the street and are talking to these chains, that are talking to these restaurants that can then bring

05:01>> them onto our platform.

GMV, Locations, and Devices Deployed

Nathan Latka

05:02How much GMV is Arthurian through all of your deployed devices today?

David Nadezhdin

05:08>> That's a good question. I wasn't prepared for that, but I would say north of a 100,000,000 right now on an annual or annually?

Nathan Latka

05:16Annual. Yeah. And and that's across how many devices?

David Nadezhdin

05:20>> We have 1,200 locations that are launched. And in terms of devices, most locations are averaging now two point of sale terminals in general.

Nathan Latka

05:29Okay. Got it. So it's 2,400 devices that you've effectively shipped.

David Nadezhdin

05:32>> Yep.

Agency Background and Founding Story

Nathan Latka

05:33Interesting. Okay. Let me get more of the backstory here real quick because some of the most successful SaaS founders, the ones IPOing today, they start off as an agency like you did twelve years ago. So I love your founding story, but I wanna dive in because I see the big successes, but I also see founders build a big agency that just does 1,000,000 a year

05:48They get addicted to that revenue, they never shut it down to build the bigger SaaS opportunity. So tell me about that. How big was your agency We and did you shut it

David Nadezhdin

05:57>> were at 45 employees. I mean, we're from Canada, so obviously, we're a little bit smaller than in The States, but we got up to about 45 employees. We were doing everything from development to everything that had to do with digital creative, so from emotion graphics to whatever was required around a campaign on a digital side.

Nathan Latka

06:17What was biggest revenue year across the 45

David Nadezhdin

06:19>> people and how much? 2,500,000 annually.

Nathan Latka

06:21Okay, so that's not an easy thing to shut down.

David Nadezhdin

06:23>> No, it's definitely not an easy thing to shut down. I shut it down because I just realized that I was going to burn out as a founder because dealing even with my partner, had a great team. When you're running 20 different projects, you're dealing with 20 different clients that have 20 different types of budgets, 20 different understanding of what those budgets are, of their technical requirements, of their timelines, of their modifications, it just never ends. It's

06:47>> just it's a continuous cycle that you're always chasing after the revenue, and I was like, this doesn't make any sense because the active capital is nice, but if I'm going to keep doing this well past my forties, one, I hope I still stay relevant, and two, I want to have the energy to keep chasing active passive, active capital. So I was like, okay, how do I turn this into a passive situation? Right? Passive capital is obviously

07:11>> the name of the game, especially for SaaS. I mean, there's an active portion to it, but once you establish your baseline, you're making passive capital, right? Like the sweetest industry that I've ever seen is still merchant services. Anything that's in payments is phenomenally lucrative because Totally, totally.

Nathan Latka

07:28Close-up the agency story though. So what did you did you shut it down?

David Nadezhdin

07:32>> I shut it down with my partner. We both we decided to part ways. He wanted to go into a gamification type of SaaS model, and I wanted to go down this path, which was

Nathan Latka

07:41Did you have to buy this technology from him or did he let you take it?

David Nadezhdin

07:45>> No, we built it for a specific customer and that customer, I ended up buying it from him.

Nathan Latka

07:49Oh, I see. Interesting. Yeah. Smart. Okay. So what does the capital look like today? Did you own 100% at the beginning of the SaaS company?

Equity Structure and Investors

David Nadezhdin

07:57>> I owned about 90% with certain partners, and then now we're still with my two founders, guess co founders when we decided to go serious about this, we're now sitting still at 75% equity, everybody else is sitting in uncommon shares. We have some great investors that came in. One of our investors is Lester Fernandez, who's the co founder of Pivotal Payments, co founder and CFO of Pivotal Payments. They went public about, I think a couple of years

08:25>> ago, maybe a little bit more, at a $5,000,000,000 market cap. There they used to be Nuvei. Now they're a payments company called Pivotal. He invested into us. He sees he sees what we're trying to do, and what we're trying to do is we're we're we don't have delusions of grandeur. We're not looking to go after square or Toast or any of that. What we're trying to do is become an ISV that a payment acquirer is going

08:49>> to want to work with.

Nathan Latka

08:50What's ISV?

David Nadezhdin

08:52>> So independent software vendor, basically.

Nathan Latka

08:54Okay. Got it. And just to be clear, just to round up the equity story real quick. So you guys own 75% today, investors own 25%. How much have you raised to date?

Funding Raised and ARR Projection

David Nadezhdin

09:03>> 1.25.

Nathan Latka

09:04And we're currently raising

David Nadezhdin

09:05>> our series A at 5,000,000.

Nathan Latka

09:07Okay. Hold on. So this is a lot to unpack. You raised 1,200,000 in what year?

David Nadezhdin

09:11>> Last year.

Nathan Latka

09:12Okay. So 20 during COVID. Wow. Okay. So what was that a priced round?

David Nadezhdin

09:16>> Yeah, it was a priced round. We did it at 7.5 pre money and we've exponentially grown since then. We're we're gonna be ending this year with a top line revenue over $2,000,000 and our ARR is going to be sitting at about 1.25 based on our prediction of what's going happen by the end of this year. But most fascinating number that we have, and this is during COVID and during the pandemic, is that our net churn is

09:41>> less than 2% annually.

Nathan Latka

09:44Got it. So, okay, got it. So on an annual basis, your net dollar retention is 98%?

David Nadezhdin

09:50>> Yes.

Nathan Latka

09:51I see. And when you say that you're raised 1.2 on a 7.5 pre, was that the right valuation or do you regret it looking back?

David Nadezhdin

10:00>> No, I don't because time was of the essence. Right? We we had we could have started to play that game and negotiate and everything, but it was a fair round. It allowed us to do what we needed to do. It allowed us to prove that during that raise, we actually got to positive EBITDA during COVID. So we proved to ourselves that we can do either of two things. We can either wind down the growth and generate

10:25>> cash, or we could start to raise more and generate value. So we're really in a sweet spot in what's happening right now. The most important thing is that most of our sales, most of our client base, we shifted from SMBs because everyone starts with SMBs, right? Individual, independent locations. We are now closing more franchises in multi locations than we are SMBs. So on we have we're just shy over 1,200 locations, less than a third of that

10:57>> are actual customers. Right. So it shows that we are really in that sweet spot of multi location management.

Nathan Latka

11:03Sorry. So when you say 1,200 locations, you're saying there's 400 brands paying you on average three locations?

David Nadezhdin

11:08>> Correct.

Monthly Recurring Revenue Growth Year Over Year

Nathan Latka

11:09I see, so 400 brands, you're doing $120,000 a month today in revenue?

David Nadezhdin

11:14>> Yes, exactly. No, a little bit less because we're still in November now and we're going to know our numbers by the end of January because what we do, because we collect SaaS, which is our internal, we also make money on hardware. Of course, it's a necessary evil, but we also make residuals on merchant services, and we always receive those residuals a month later. So we're always one one month behind.

Nathan Latka

11:35Got it. So maybe like 100, 110 right now, but where were you exactly a year ago?

David Nadezhdin

11:40>> We were at less than half of that.

Nathan Latka

11:42Okay. So maybe like $50,000, something like that?

David Nadezhdin

11:45>> We ended the year at 48,000 actually in monthly recurring revenue.

Nathan Latka

11:50Okay, got it. So nice growth, 100% year over year growth. You're raising 5,000,000 now. What valuation are you targeting?

David Nadezhdin

11:55>> 20,000,000, pretty much.

Nathan Latka

11:57Do you think you'll get it?

Series A Raise and Growth Ambitions

David Nadezhdin

11:58>> Yeah, absolutely. We actually have two partner acquirers in The United States that are looking at file carefully right now. We already have two VCs that want to follow not as leads because they finish all of their rounds as leads this year. So we're open to talking to different people that want to hear our story and where we want to go.

Nathan Latka

12:19Raising five on 20 pre, 25 post would mean you're selling 20% extra of the business, which means you're 70% will now go down to something closer to 58, 57%. Why do you want to take that dilution?

David Nadezhdin

12:32>> Because right now is the opportunity for us to grow. I said, the longer that we delay, we can start to generate a healthy profit and just be a company that grows steadily, but now is a massive opportunity for us. We're starting to see that, just to put in perspective, we just started to send our sales reps across the country in Canada.

Sales Team, Customer Success, and Franchise Shows

Nathan Latka

12:53How many sales reps do you have?

David Nadezhdin

12:55>> Six.

Nathan Latka

12:56Paid quota?

David Nadezhdin

12:57>> Yep. Quotas and commissions and everything. And we have only two customer success people. That's how simple our system is to use. What started to leverage is, we started to go into franchise shows with our sales team and no one's there. No one's approaching these franchises. No seems to have the offering that we have, which is interesting and unique and definitely humbling. But at the same time, it's like, well, are we are we gonna, like, take the

13:28>> time and negotiate, or are we gonna raise and grow the grow this company?

Team Size and Engineering Headcount

Nathan Latka

13:32Makes sense. I get it. Couple rapid fire things here as we wrap up. Team size today, how many full people?

David Nadezhdin

13:37>> 24 people.

Nathan Latka

13:38How many engineers?

David Nadezhdin

13:40>> Seven.

Nathan Latka

13:41Me real

David Nadezhdin

13:42>> Including myself, maybe eight.

Hardware Model and iPad CAC Strategy

Nathan Latka

13:43Alright. Fair. Tell me real quick about the IoT play. You advertise a free iPad if they pay annually upfront. How do you make money on hardware?

David Nadezhdin

13:50>> So so other than other than the iPad and iPad is only if they have specific criteria that they're eligible for that, but we make money because we're we're dealing with, only two, suppliers. We have Bluestar, and we have Apple. So what we're doing is we invoice. We're obviously making a markup on that, and what's great is that we don't have to deal with any of the RMAs. Furthermore, all of our installations are not done by us.

14:14>> There's a third party company that handles KFC, Pizza Hut, and Burger King across North America. So they do all of our installations.

Nathan Latka

14:21Wait. Wait. Be specific. So if Pizza Shop signs up for you, they need to install two of these POS systems. What what's that cost to install two POS systems, the hardware?

David Nadezhdin

14:30>> Less than less than $400. Oh, and hardware wise, hardware is on average, we're looking at a ticket size of maybe fifteen hundred to two thousand if it's a brand new store. If it's already sitting on an iPad based system, obviously there's going be less stuff to buy.

Nathan Latka

14:43That's fine, that's fine, but you charge the customer $2,000 and how much does it, Do you actually build the hardware yourself or you source it from Bluestar or someone else?

David Nadezhdin

14:50>> We source it from Bluestar, so Epson, APG, APG cash drawers, iPad stands, Volt Pros.

Nathan Latka

14:56What does Bluestar charge you for those two devices?

David Nadezhdin

15:00>> We make 40% on top.

Nathan Latka

15:01Oh, wow. Okay. So on a $2,000 purchase, you're paying BlueStar 1,200, making a spread there of about $800 to the SMB.

David Nadezhdin

15:07>> Correct. And we don't even deal with the RMA, which is a really sweet position.

Nathan Latka

15:10I don't know what that is. What's the RMA?

David Nadezhdin

15:12>> If something breaks down, they don't deal with us. They just deal straight with the BlueStar or with us.

15:16>> Oh, interesting. Okay.

Nathan Latka

15:17Okay. And you've installed It's

David Nadezhdin

15:19>> in In N Out.

15:20>> Yeah. Now you've installed over 2,000 tie like, 2,000 basically terminals, you said. So we can take 2,000 times what?

Nathan Latka

15:26800.

David Nadezhdin

15:27>> You've made almost 1,600,000 there on the hardware spread?

Nathan Latka

15:30>> Yep, exactly.

15:30That's impressive. Obviously not recurring, but it helps drive retention up. People aren't going to rip those out.

David Nadezhdin

15:34>> No, they definitely don't. And they usually do a hardware swap every three to four years.

Nathan Latka

15:39Oh, wow. Interesting. Okay. So 1,600,000 made there, that helps fund your SaaS growth. SaaS, it sounds like it's growing nicely. I think I've got most metrics here. Tell me about the iPad thing real quick, because it's basically CAC, right? So how much do they have to spend with you in that first year paid upfront in order for you to spend $800 on a free iPad?

David Nadezhdin

15:56>> So what we've actually done is the following. We pay upfront for the actual iPad, but what we ensure with the customer is that when they want, we call it an adapt, let's say customer, they want to go digital, they need an iPad really quickly. As long as they this eligibility criteria, they're in business for two years, so we know that they're not going anywhere. They sign a personal guarantee. They pay us upfront one month, and then

16:23>> we add on top a monthly SaaS of approximately 15 to $20, which cover and they pay for a year upfront. So we'll finance the iPad, but they're now our customer. And

Nathan Latka

16:34Have you raised debt financing for the business to subsidize the iPad sales?

Debt Financing, BDC, and R&D Subsidies

David Nadezhdin

16:37>> Yes, we have. So we were financing ourselves with the BDC. We have now we're now talking to SVB Bank that's now actually transitioned to Canada, so they're very aggressive, which is good for us. And we and and what's also great is that in Canada, we have a huge research and development fund, so most of our development is is subsidized by the government.

Nathan Latka

16:56Yeah. SR&ED financing 60% kickback effectively. Right?

David Nadezhdin

16:59>> Exactly. Even up to 75.

Nathan Latka

17:01Yeah, the BDC, some of the deals I've looked at with them helping Canadian founders raise, I've seen interest rates as low as 4%. Are you in that same range or a little higher because Exactly.

David Nadezhdin

17:08>> You're No, we're actually in that range.

Nathan Latka

17:104%, interesting. Very cool. Actually,

David Nadezhdin

17:13>> last year they gave us a no

17:16>> interest loan, but we just have to pay monthly.

Nathan Latka

17:19God, you gotta love government money. Gotta love the printing press.

David Nadezhdin

17:22>> Who cares about inflation? Screw inflation.

Nathan Latka

17:25Look, I'm just going to stay exposed to Bitcoin and, you know, you guys keep printing money. Alright.

David Nadezhdin

17:29>> Yeah. That's right.

Famous Five Rapid Fire

Nathan Latka

17:30David, let's wrap up with a famous five. Number one, favorite book?

David Nadezhdin

17:34>> That's a very good question. I would have to say Homer's The Odyssey. I'm a I'm a mythology freak.

Nathan Latka

17:40Number two, is there a CEO you're following or studying?

David Nadezhdin

17:43>> Elon Musk.

Nathan Latka

17:44Number three, what's your favorite online tool for building, myr? Which basically, by the way, guy stands for manage your rush.

David Nadezhdin

17:50>> So what do you mean by managing my rush? I I that's an interesting question.

Nathan Latka

17:54No. No. Like your favorite just your favorite tool for building. You know, what do you use the most?

David Nadezhdin

17:58>> You know, what's funny is that I'm an old school base camp, so 37 signals would also be one of those books I would like to put into the first answer.

Nathan Latka

18:06Number four, how many hours of sleep do get every night?

David Nadezhdin

18:08>> I try to do six to eight.

Nathan Latka

18:11Okay. And, David, situation, married, single, kids?

David Nadezhdin

18:15>> Girlfriend, no kids.

Nathan Latka

18:16Not married?

David Nadezhdin

18:17>> All my employees are my kids.

Nathan Latka

18:19Fair. Fair. Fair. Alright. And how old are you?

David Nadezhdin

18:22>> 41.

18:23>> 41. Last question.

Nathan Latka

18:24Something you wish you knew when you were 20.

David Nadezhdin

18:26>> What I know today.

Nathan Latka

18:28Anything specific, though?

David Nadezhdin

18:31>> You know what? It would be I'm I'm I may probably people watching this will see that I'm I'm kind of like jumpy, passionate, whatever, to take more time to before responding to any questions.

Nathan Latka

18:46Guys, there you have it. David founded myr. Back five years ago, spun it out of his agency, which was doing 2,500,000 a year in revenue, 45 employees. Again, shut it down to build this SaaS tool because he likes the recurring revenue, doing $48,000 a month last year, growing to $110,000 a month now today. Nice growth, raised 1,200,000 seed last year at a 7.5 pre, now raising five on a 20 pre. As they look to scale, they're

19:06making money both on SaaS and also installed devices, helping restaurants, small chains, coffee shops, manages POS systems, both online and in person. They've deployed 2,000 systems. They make about 800 per system installed. Call it 1,600,000 in revenue there as they continue to scale with their team of 24. David, thanks for taking us to the top.

David Nadezhdin

19:25>> Thank you so much. One

Nathan Latka

19:28more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on three hungry buyers. They try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM Central.

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21:03See you.